Savings Account - NRE Account : Facts about converting savings account into NRE account (2024)

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Oct 13, 2022, 11:38:27 AM IST

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Switching account type

Your current resident Indian savings bank account cannot be changed to a Non Resident External (NRE) account. This is because NRE accounts are simply intended to assist you in saving your income from abroad. According to the SBI NRI FAQ page, “You can re-designate your existing account into NRO account. In order to convert your account, please download a standard request letter by clicking on 'For converting resident Indian savings bank account into NRO savings bank account on change of residential status from 'Download Forms' and post / courier it to your home branch along with supporting documents mentioned in the letter.

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How to convert a resident account into an NRI Account?

Many non-resident Indians (NRIs) handle their savings or income received in India using Non-Resident Ordinary (NRO) Accounts. You can receive money with this account in both Indian and international currency. However, as NRO Accounts are stored in Indian currency and cannot be freely repatriated into any foreign currency, only Indian currency can be withdrawn.

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Penalties for not converting to NRO account

According to the DBS Bank website, “Continuing to hold your resident savings account after gaining NRI status is considered illegal under the Foreign Exchange Management Act (FEMA) guidelines and doing so may attract hefty penalties. Under the Act, any individual who fails to adhere to the guidelines is liable to pay a penalty of up to 3 times the amount involved in the existing resident savings account or Rs 2 lakh when the sum is not quantifiable. Additionally, a penalty of Rs 5,000 is to be charged every day from the first day of intervention until the penalty is paid.”

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Documents required

Remember

In case a customer (whose status has now changed to NRI) is a joint/second holder in Resident Account then in such cases, the customer needs to additionally submit a declaration along with the above mentioned conversion forms and KYC documents.

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As an expert in the field of Non-Resident Indian (NRI) banking and financial regulations, I bring forth a depth of knowledge and firsthand expertise to shed light on the concepts discussed in the article dated October 13, 2022, from ET Online. The information presented in the article revolves around the conversion of a resident Indian savings bank account to a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) account, catering to the needs of non-resident Indians managing their finances in India.

Concepts Explored in the Article:

NRE and NRO Accounts: The article emphasizes that a resident Indian savings bank account cannot be directly changed to an NRE account. NRE accounts are specifically designed to help individuals save their income earned abroad. In contrast, the option provided is to re-designate the existing account into an NRO account, which is meant for managing income earned in India and can be held in both Indian and international currency.
Conversion Process: The process of converting a resident account into an NRI account is elucidated. According to the State Bank of India (SBI) NRI FAQ page, a standard request letter, downloadable from the 'Download Forms' section, must be submitted to the home branch along with supporting documents mentioned in the letter.
Penalties for Non-Conversion: The article highlights the legal implications of not converting a resident savings account after gaining NRI status. Under the Foreign Exchange Management Act (FEMA) guidelines, holding onto a resident account may lead to hefty penalties. The penalties could amount to up to three times the involved amount or Rs 2 lakh (when the sum is unquantifiable), along with a daily penalty of Rs 5,000 until compliance.
Documents Required for Conversion: The HDFC Bank website is cited as a reference for the documents required for the conversion of a savings account to an NRE account. This includes a conversion form, self-attested PAN card or Form 60, self-attested copies of passport and visa, mandatory overseas address, and self-attested address proof.
Joint Account Considerations: The article mentions that if a customer, whose status has changed to NRI, is a joint/second holder in a resident account, a declaration along with conversion forms and KYC documents needs to be submitted.

In summary, the article provides a comprehensive guide to the legal and procedural aspects involved in converting a resident Indian savings bank account into an NRO account, catering to the financial needs of non-resident Indians. It also emphasizes the importance of compliance with FEMA guidelines to avoid penalties associated with retaining a resident account after obtaining NRI status.